NewChina’s ailing property sector to weigh on economy in 2015; GDP growth at slowest in 24 years

Mainland China’s property investment grew 10.5 per cent in 2014, down from the previous year’s rise of 19.8 per cent, as record high housing inventories will likely weigh down real estate this year, exacerbating a slowdown in the wider economy that saw the economy grow at its slowest pace in almost a quarter century.

Data released by the National Bureau of Statistics on Tuesday showed property investment directly accounted for 14.9 per cent of China’s gross domestic product last year, down from 15.1 per cent in 2013.

Partly because of the property market correction, the world’s No 2 economy grew 7.4 per cent last year, the slowest pace in 24 years and missing the official target of 7.5 per cent.

“It will not be a surprise to see property investment slow to single-digit growth this year as the industry is suffering serious overcapacity due to explosive expansion in the past few years,” said Qi Jingmei, a senior researcher at the State Information Centre, a top government think tank in Beijing.

The country had a record pile of 621.69 million square metres of unsold property by the end of 2014, when full-year property sales fell 7.6 per cent to 1.2 billion square metres. Property sales revenues also dropped 6.3 per cent last year to 7.6 billion yuan (HK$9.6 billion), compared with a rise of 26.3 per cent in 2013.

Mainland developers led by the country’s biggest home builder China Vanke have quickened their restructuring pace since last year as they expect fast growth in housing demand to taper off and destocking has become their first priority this year.

Qi told South China Morning Post that it would be conducive to the industry’s long-term outlook if many small developers could be washed out while strong players can focus on how to build better homes instead of reaching out to other temporarily more profitable sectors.